LSE’s revenue warning over reforms

The London Stock Exchange said proposed reforms to improve safety buffers in share trading would hit revenue and force it to find up to 375 million euros ($482.3m) of capital, sending its shares down 7 per cent to a two-month low.

The LSE was reacting to proposals from the European Securities and Markets Authority (ESMA), an adviser to the European Commission, intended to help shore up the region’s stock markets in the event of another Lehman-style collapse.

The ESMA’s proposals came in a submission to the European Commission and the European Banking Authority (EBA), which are overhauling the regulation of Europe’s financial system in response to the banking crisis. The ESMA has proposed the commission restrict how exchanges like the LSE hold capital as insurance against a bank default and increase the levels of capital the exchanges hold back through their clearing houses.

Clearing houses won support from regulators for their performance after the collapse of Lehman Brothers in 2008.